Tesco celebrates growth with first dividend payment since 2014

BRITAIN-RETAIL-FOOD-EARNINGS-BUSINESS-TESCO

BRITAIN-RETAIL-FOOD-EARNINGS-BUSINESS-TESCO

Tesco was forced to scrap its dividend three years ago when an accounting mishap caused it to overstate its profits ahead of its interim results in 2014.

However, Tesco's shares fell as much as 4 percent, reflecting lingering concerns over the merits of its 3.7 billion pound ($4.90 billion) agreed bid for wholesaler Booker, UK consumers' waning spending power and the threat of online rivals.

Mr Lewis said the group was as "shocked as anybody" by the undercover media investigation, but it would keep the brand, which he insisted had a quality specification unique to Tesco.

Shareholders will be cheered by news that the supermarket giant has re-introduced a 1p per share interim dividend payment, the first time since 2014/15, equating to around a 3p dividend for the whole year.

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Tesco has reported a 3.3% increase in group sales, with sales in United Kingdom stores up 2.2% on a like-for-like basis at the interim stage.

It made operating profit before one off items of 759 million pounds ($1 billion) for the six months to August 26 - ahead of analysts' forecasts.

Revenue rose 3.7 per cent, from £27.3bn to £28.3bn.

He has been leading the fightback after Tesco's sales and profit were hammered by changing shopping habits, the rise of discounters Aldi and Lidl and a 2014 accounting scandal which plunged the firm into its worst crisis in its near 100-year history.

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Mr Lewis confirmed that Tesco would resume paying a dividend, a move that had been widely anticipated after the company notched up its seventh quarter in a row of rising sales.

'Management's long-term ambition to offer a dividend that is covered two times by earnings per share looks perfectly sensible, even if the prospective 1.7% yield on offer for this year may not be enough to excite income seekers just yet'.

The secret of his success has also been down to working with "fewer suppliers and then us [ing] Tesco's formidable buying power to drive down their prices", according to Ibbotson.

Meanwhile, Derya Yildiz, Kantar Retail senior analyst, said Tesco has been doing everything it takes to ensure shopper satisfaction.

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"The Competition and Markets Authority is due to deliver its findings soon, and the recent plight of Palmer & Harvey, one of Tesco's key suppliers, will serve to underline the potential knock-on effects of the deal".

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